Muhammad was suspended for six games for violating the NFL's policy on performance-enhancing substances Wednesday, Kevin Bowen of 107.5 The Fan Indianapolis reports.
Muhammad and the Colts agreed on a one-year contract Friday, Adam Schefter of ESPN reports.
The Bears have released Muhammad, Adam Schefter of ESPN reports.
Muhammad recorded two tackles in the Bears' 29-13 loss to the Vikings in Week 18, and ended the season with 29 tackles, one sack and a forced fumble over 17 games played.
Muhammad (knee) is listed as active for Sunday's game against the Falcons.
Muhammad (knee) is considered doubtful to play Sunday against the Lions.
Muhammad tallied two tackles and a sack in the Bears' 12-7 loss to the Commanders on Thursday.
Muhammad is one of four defensive ends listed on the Bears' regular-season roster, according to the team's official site.
Muhammad participated in the first day of Bears' training camp, Sean Hammond of Shaw Local News reports.